Yes, in principle. In practice most foster carers pay no income tax at all on what they earn from fostering, and plenty go a whole career without owing a penny on it. That is not a loophole or a clever bit of accounting. It is a relief HMRC built specifically for carers, called Qualifying Care Relief, and it is generous enough to cover the great majority of fostering households.

What you do still have to do is register with HMRC, keep a short list of dates, and send in a tax return every year. Including the years you owe nothing. That last part is the bit that catches people out, so it is worth understanding before you are approved rather than the following autumn.

Please note: this is general information for prospective and new foster carers, not personal tax advice. All figures are for the 2026/27 tax year unless stated otherwise, and the thresholds are uprated most years. Check the current position on HMRC’s helpsheet HS236 or with an accountant before you rely on it.

You are self-employed, even if it does not feel like it

HMRC treats foster carers as self-employed. You are not on our payroll, we do not take tax off before we pay you, and no P60 lands in April. What arrives instead is a statement from us showing what you were paid and when, and the job of declaring it is yours.

That sounds heavier than it is. Self-employment for a foster carer usually means one registration, one online form a year, and a folder of dates. No invoices, no VAT, and for most carers no accountant.

If you already send HMRC a tax return for something else, a small business or a rented-out flat, you do not register a second time. You tell HMRC that fostering income has joined the picture.

What Qualifying Care Relief actually does

Qualifying Care Relief gives your household a tax-free amount built around fostering itself rather than around a salary. It comes in two parts that add together:

• a fixed amount of £20,440 for the 2026/27 tax year, per household rather than per carer
• a weekly amount for each child in your care: £435 a week for a child under 11, and £515 a week for a young person aged 11 or over

If your fostering income for the year lands under the combined figure, your taxable fostering profit is nil and there is nothing to pay.

For the 2025/26 tax year, the one covered by the return due on 31 January 2027, the numbers are lower: £19,690 fixed, £415 a week for a child under 11, and £495 for 11 and over. The figures are uprated most years, so always check the year you are filing for, not the year you are sitting in.

Two details matter more than people expect. The weekly amount is per child, so a household caring for two children has two of them running side by side. And HMRC’s tax week runs Monday to Sunday, with any part of a week counting as a whole one, so a child who arrives on a Saturday earns a full week of relief for that week.

Set our own rates against those thresholds and you can see why so few carers owe anything. South Coast Fostering pays £479.50 a week for a child aged 10 and under, and £507.50 for a young person of 11 or over. Care for one eight-year-old for a full year and you would be paid £24,934. The relief for that same year comes to £20,440 plus 52 weeks at £435, which is £43,060. Nothing to pay, and a wide margin before there would be. There are fuller worked examples in our guide to how foster carer pay works in Southern England.

Registering with HMRC comes first

You must register as self-employed by 5 October following the end of the first tax year you need to file for. Approved in June 2026? Your first tax year ends on 5 April 2027, and your deadline to register is 5 October 2027. There is no advantage in waiting, and doing it in your first quiet week is kinder to yourself than doing it in a rush.

You register online through gov.uk. Have your National Insurance number, your address and contact details, an email address, and the date you started fostering. Your business name can simply be your own name. When the form asks what you are registering for, choose self assessment including Class 2 National Insurance contributions.

HMRC then sends a Unique Taxpayer Reference, a ten-digit number known as a UTR, usually within a couple of weeks. Write it somewhere you will find it again in January, along with your Government Gateway user ID. A fair share of the panic around tax returns is people hunting for login details at eleven o’clock on 31 January.

The dates to put in your diary

• 5 October, to tell HMRC you need to file, if this is your first year
• 31 October, if you are filing on paper
• 31 January, if you are filing online, which is also the day any tax is due

HMRC charges an initial £100 penalty for a late return, and adds more at three, six and twelve months. Filing a nil return takes far less time than arguing about a penalty.

Two ways to work out your profit

Most foster carers use what HMRC calls the simplified method. Your profit is your fostering income minus your qualifying amount, and if that comes out at zero or below, your taxable profit is nil. You do not have to record what you spent on petrol or swimming lessons, which is the real gift here.

The alternative is the profit method: add up your actual fostering expenses and take them off your fostering income. It only helps if your expenses are unusually high, and it means keeping receipts for everything, all year. Talk to your supervising social worker or an accountant before you choose it. Almost nobody needs it.

National Insurance and your state pension

Here is the quiet catch inside a relief that otherwise works beautifully. If your taxable profit is nil, you are not paying National Insurance on your fostering income, and a year with no contributions can leave a gap in your record towards the state pension.

For 2026/27, Class 2 contributions are treated as paid if your profits reach the Small Profits Threshold of £7,105. Under the simplified method most carers show nil profit, so that does not happen automatically. You have two ways round it. You can pay Class 2 voluntarily at £3.65 a week, roughly £190 a year. Or you can apply for National Insurance credits as an approved foster carer, which cost nothing, and which count towards your state pension.

The credits are free and the contributions are not, so most carers apply for the credits. You claim them on form CF411A, for each tax year separately, and the application has to reach HMRC by the end of the following tax year. You will need a letter from us confirming that you were fostering during that year. Ask us for it. We write them regularly and we would far rather send one in May than hear in twenty years that a gap went unnoticed.

Class 4 National Insurance, charged at 6 per cent on profits above £12,570 and 2 per cent above £50,270, almost never comes into it for foster carers on the simplified method.

The records worth keeping from day one

Your record-keeping for tax is short. For each child who lives with you, note their date of birth and the exact dates they arrived and moved on, and whether they were under 11 or 11 and over during that time. Keep the statements we send you. Keep your UTR and your Government Gateway details.

That is genuinely it, under the simplified method. Half an hour with a notebook in April, and the return itself is a short one.

Making Tax Digital probably does not apply to you

Making Tax Digital for Income Tax started rolling out from April 2026, and it worries carers who have heard about quarterly reporting. The Low Incomes Tax Reform Group is clear that if qualifying care receipts are your only income, you are exempt from it. If you also have other self-employed or rental income, the exemption still runs to April 2027, after which the usual thresholds apply.

You won’t have to do this alone

Nobody comes into fostering because they enjoy self assessment. What we can do is take most of the uncertainty out of it: a clear end-of-year statement showing exactly what you were paid, a letter for your National Insurance credits whenever you need one, and a supervising social worker who has walked plenty of carers through their first return. It is part of the support that comes with fostering through us, and you should ask us early and often. A child isn’t just given a home, they’re given a chance, and the paperwork that sits behind that should never be the reason someone hesitates.

Frequently asked questions

Do I have to file a tax return if I owe no tax?

Yes. Once you are registered as self-employed, HMRC expects a return each year even when your taxable profit is nil. It is usually a short one.

Does Qualifying Care Relief replace my personal allowance?

No. The relief sits on top of your personal allowance, which is £12,570 for 2026/27. If fostering is your only income, both are available to you.

What happens if my fostering income goes over the relief?

Only the excess is taxable. Under the simplified method your profit is your fostering income minus your qualifying amount, and your personal allowance is still there underneath it. Carers who go over usually do so because they are caring for several children at once, and even then the tax owed is often small.

Will my state pension suffer if I pay no National Insurance?

Not if you act. Apply each year for National Insurance credits as an approved foster carer, or pay voluntary Class 2 contributions. Both protect your record. Ask us for the confirmation letter you will need.

Do I need an accountant?

Most South Coast foster carers do not. If you have other businesses, high fostering expenses, or income that takes you past the relief, an accountant who knows Qualifying Care Relief is worth the fee.